Invoice finance — also known as debtor finance or accounts receivable financing — allows a business to advance cash against outstanding invoices rather than waiting 30, 60 or 90 days for clients to pay. For businesses with strong revenue but slow-paying clients, invoice finance converts outstanding invoices into immediate working capital.
How Invoice Finance Works
The basic process: your business issues an invoice to a client. You submit the invoice to the invoice finance lender. The lender advances you a percentage of the invoice face value — typically 70 to 90 percent — within 24 to 48 hours. When the client pays the invoice (on the normal payment terms), the lender pays you the remaining balance minus their fee. Your business receives the cash immediately rather than waiting for the client payment cycle.
Invoice Factoring vs Invoice Discounting
Invoice factoring: the lender manages the collection of the invoice from your client. Your client knows the invoice has been sold to a factoring company. Invoice discounting: your business continues collecting from clients, and the finance is provided confidentially — your client doesn't know the invoice has been used for finance. Most Australian businesses prefer confidential invoice discounting to maintain normal client relationships.
What Does Invoice Finance Cost?
Invoice finance is typically priced as a fee per invoice or a percentage of the invoice value — commonly 1 to 3 percent per invoice. The effective annual rate depends on how quickly invoices are collected. A 2 percent fee on a 30-day invoice equates to approximately 24 percent per annum on an annualised basis — higher than most asset finance but often justified by the cash flow improvement it provides.
Who is Invoice Finance Right For?
Invoice finance suits businesses that: invoice other businesses (B2B) rather than consumers, have payment terms of 30, 60 or 90 days that create cash flow gaps, have strong revenue but need working capital to fund operations or growth, or are growing faster than their cash flow can support. It is particularly common in construction, labour hire, transport and professional services.
How to Qualify
Invoice finance eligibility typically requires: an active ABN and GST registration, invoicing other businesses (not consumers), invoices that are genuine and not disputed, a minimum monthly invoice volume (typically $30,000 to $100,000 per month depending on the lender), and no personal insolvency history. No property security is required — the invoices themselves are the security.
Overdrive Funding compares invoice finance options across specialist lenders. Contact us for a free invoice finance assessment.